$7.4 million ruling puts Michigan high school sports suit in new light

During its decade-long battle against a gender-discrimination lawsuit, the Michigan High School Athletic Association waved off questions about the expense of the lengthy litigation over its girls' sports schedule.

Executive Director John Roberts' standard response was that the organization's insurance was picking up the tab, and the fight was being waged with "no cost" to taxpayers and member schools.

There was, however, one nagging concern: If the MHSAA lost the suit, it would be liable for the plaintiffs' legal bills.

Now that concern has become a reality that threatens the association's very survival. Two weeks ago, almost a year to the day that the U.S. Supreme Court refused to hear the association's final appeal, U.S. District Judge Richard Enslen, of Kalamazoo, ordered the organization to pay $7.4 million in legal fees -- $1.5 million more than the organization's entire worth.

But others say the association made a major misjudgment in not settling the suit long ago. They feel the insistence on exhausting every legal option only delayed the inevitable while compounding the organization's financial liability.

"I think they shot themselves in the foot," said Comstock Public Schools Superintendent David Hutton. "Anybody who knows school law knows they shouldn't have carried it this far. There was all this case law around the country, so why did they ever think they were going to win this?"

Yet Hutton concedes the association serves a vital function for Michigan schools and it would be a "mess" if the organization disbanded.

"They monitor all the rules and regulations of high school athletics in Michigan and oversee issues like coaching and parental involvement," Hutton said. "Somebody has to coordinate all that, and if the association goes down the tubes, principals and athletic directors would have to do it. They don't have the time, and it would just be too hard to get everybody together."

Kristen Galles is less sympathetic about the association's current dilemma.

The Alexandria, Va., lawyer was the main attorney for the plaintiffs and took on the case 12 years ago on a contingency basis. During that time, she said, she's worked on the case without payment and has lived on her savings and fees from other cases.

The irony, Galles said, is that, "Early on, the MHSAA was like, 'we're going to bankrupt you. We're going to drag this case on until you don't have any money left or any lawyers.'"

Galles said she feels the association "is now trying to demonize us when it's their own disastrous decision-making that led them to this."

'Exceedingly persuasive'

When female athletics began expanding in the 1970s, Michigan was among the states that put males and females in different seasons to maximize facility use.

But around the country, that arrangement -- especially playing basketball in the fall and volleyball in the winter -- drew complaints of gender discrimination. Seven other states changed their athletic seasons after being sued or to head off litigation.
Michigan, the last state to make the switch, fought the change the longest and hardest.

Warned by state officials about compliance issues, a MHSAA committee in the early 1990s recommended changing the girls' seasons. Communities for Equity, a Grand Rapids-based group, spent several years trying to persuade the MHSAA to follow through with such a plan before it filed a class-action suit in 1998.

The case went to trial in 2001 in Enslen's Kalamazoo courtroom. Communities for Equity argued that by playing in different seasons than other girls around the country, Michigan girls were less likely to be named to All-American teams or win athletic scholarships. The group also argued the MHSAA schedule made it difficult for the girls to participate in national competitions and clinics or to play against girls in neighboring states. The U.S. Justice Department filed a brief supporting the plaintiffs.

The MHSAA originally focused on the argument it was a private organization and not subject to discrimination laws, pointing to a case involving the Tennessee athletic association.

Then just before the Michigan case went to trial, the U.S. Supreme Court reversed the Tennessee ruling, undermining MHSAA's main defense. That meant MHSAA faced a legal standard of showing "exceedingly persuasive" reasons for treating the girls differently.

To that end, the association argued that staggering the seasons optimized use of facilities, coaches and referees, which in turn led to higher participation rates. It also said girls benefited from a schedule that allowed college coaches to scout and recruit Michigan girls in the college off-season.

On the college recruitment issue, the evidence was mixed. Enslen also said the "exceedingly persuasive" standard required that the MHSAA show benefits that led to establishing the system in the first place and not rationales developed in response to litigation. And the evidence was pretty clear that MHSAA's schedule was initially designed to minimize inconvenience for boys.

The MHSAA unsuccessfully appealed the case for six years.

"It should have been apparent to MHSAA that it was fighting a losing battle," Joseph Hodal wrote in the DePaul Journal of Sports Law in 2003. "Similar cases brought in other states ... had unmistakably gone in favor of the complaining female athletes."
Justin King, executive director of the Michigan Association of School Boards, said his organization fully supported the MHSAA in the court case.

But, King acknowledged, "clearly, they were blowing against the wind" of prevailing court sentiment.

Not backing down

So why did the MHSAA continue to fight the case for so long?

Roberts has said his organization was following the wishes of the 1,800 secondary schools it represents.

"A huge majority" of Michigan school officials supported the MHSAA on the lawsuit, King said. Most "felt that (the girls' schedule) was working well for everybody concerned" and that a change would cause more problems than it would solve.

Galles said school officials didn't fully understand the legal issues at stake or the financial liability the association faced.

Roberts repeatedly told school officials and members of the media the costs of continuing the court case were being covered by insurance. King acknowledges it's "probable" that one reason school officials supported the case's continuance was because they were unaware the final costs would likely exceed the insurance coverage.

Yet Roberts and other association officials knew losing the suit would result in covering the plaintiffs' court costs.

"The only way to assure that expense could be avoided is to appeal and prevail," the MHSAA reported in its September-October 2004 newsletter to members.

For that reason, the newsletter said, the organization planned "to continue the past practice of utilizing fully all legal options" in fighting the lawsuit.

As it turns out, "utilizing all legal options" meant the association's $2 million in liability insurance was exhausted by its own lawyer bills.

Ron Fuller, superintendent of the Kalamazoo Regional Educational Service Agency, said he's always had mixed feelings about the court case.

"I don't believe the courts should be in the business of telling athletic directors when to run their sports programs," Fuller said. "But I also don't think the athletic association should have carried the fight as far as they did.

"After the initial ruling, I probably would have walked away. What was the point of running up $5 million, $6 million in legal fees? I believe it got to the point where it became, 'You're not going to tell me what to do.'"

The report in the 2004 MHSAA newsletter suggests that may have been the case. Fighting the lawsuit was important, the newsletter said, "to restore schools' authority to make policies for interscholastic athletics."

The future

What happens now is anybody's guess, but the current conventional wisdom is that the plaintiffs' attorneys are unlikely to get the full $7.4 million and the association is unlikely to disband.

The most probable scenario, school officials and lawyers say, is that the association might use Chapter 11 bankruptcy to protect its assets and give them leverage in negotiating a smaller settlement.

"They have three options," said H. Rhett Pinsky, a Grand Rapids attorney who is one of the plaintiffs' attorneys. "They can appeal (the fee ruling) and run up more fees, or they can try to settle, or they can go into Chapter 11 and they'll still owe us a chunk of money anyway."

Galles said the MHSAA could raise the money to cover the judgment "very easily" by spreading the bill among its 1,800 members. She said she and the other attorneys are open to a payment plan.

Galles also said that if the association declares bankruptcy, "everything becomes public and they'll have to let everybody see what they're doing with their money."
The association has about $6 million in assets, including its East Lansing headquarters. Its Web site lists a staff of 19. As executive director, Roberts makes $183,000 a year. The organization gets its income through programs it sponsors and conducts.

"It is reasonable to anticipate that member schools will continue to have nearly the MHSAA's full range of services," said Roberts' April 9 statement, "although they may not be at the same level of financial support available for some MHSAA programs and events for some length of time."

Meanwhile, Michigan schools are in the midst of their first school year under the new sports schedule created as a result of the lawsuit.

"There's been plenty of bellyaching" about overhauling schedules and adjusting to new routines, King said, adding that participation rates are down this year for both male and female athletes.

Kalamazoo attorney James Ford said the schools may be right in saying the change will hurt rather than help girls' sports.

"But being right doesn't mean you're going to win" a lawsuit, Ford said. "The law is often an ass, but it is the law."